1.

Definition of Strategic Management

There are 2 types of strategic Management Theory. There are:
1 Strategic Management (Theory: 2000-2010)
2 Strategic Management (Theory: 2011-2015+-)
In our report is based on Etihad Airways. And that reason we need
to find that what type Strategic Management Theory follows by
Etihad Airways. Where Strategic Management (Theory: 2000-
2010) can be defined as, the art and science of formulating,
implementing and evaluating cross-functional decisions that
enable and organization to achieve its objectives. Which is not
related the overall strategic management process by Etihad
Airways. They follow the Strategic Management (Theory: 2011-
2015+-). This strategy focuses on integrating management,
marketing, finance/Accounting, productive/operation, research
and development (R&D) and computer information system to
achieve organizational success. And Etihad Airways followed
strategy development which is comprised of five stages:
1. Discovery: This stages Etihad’s all members of the team to
individually gather information on an agreed upon set of
attributes affecting the organization.
2. Strategic thinking: After the discovery they can be defined
as ‘the generation and application of business insights on a
continual basis to achieve competitive advantage’.
3. Strategic planning: Strategic planning stages Etihad
assemble a mission statement, set goals and objectives, audit the
organization for internal strengths and weaknesses, assess the
external environment for opportunities and threats, evaluate
strategic options, and then select and operationalize an
organizational strategy.
4. Strategy roll-out: This stage they follow into activities and
offering and ensure that the strategy is communicated well
throughout the organization.
5. Strategy tune-up/adjustment: And this stages Etihad
Airways phase is a meeting held several times per year to keep
track of the progress of the implemented strategy and adjust for
changes in the internal and external climate of the organization.

2. Most Strategic Management models:

1. PESTEL Analysis
2. STEER Analysis
3. Five Forces Model
4. Strategic Group Map
5. SWOT Analysis
6. Blue Ocean Strategies
7. Open innovation
8. Seven S Model
1) Strategic Group Map of Etihad Airways
1 Extent of Product diversity: As far as the first class and
business class is concerned, Etihad Airways segregates its
services as Etihad Diamond First Class and Etihad Pearl
Business Class.
2 Extent of Geographic Coverage: Etihad Airways operates in
Europe, North America, Latin America, Australia, Asia
Pacific and Middle East (Malaysia, China, Indonesia and
Qatar), and Canada
3 Number of Market Segment Served: Etihad Airways
segments the market according to the geography
and psychographic to spread its overall business
internationally.
4 Distribution Channels Used: Etihad Airways are running
their business in codeshare agreements to major market
hubs.
5 Extent of Branding: Etihad Airways brands its products
through, print media, publicity and web based media
predominantly etc.
6 Marketing Effort: Environmental Laws and regulations while
operating can add to the cost and difficulty of marketing or
transporting products across state and international borders.
7 Product Quality: High quality is maintained while they
 provide service for the customer.
8 Pricing Policy: Etihad Airways follows consistent price
policy. Etihad Airways would not only avail booking facility
at its main offices but also increase sales in general
throughout the Asian region that it targets. Also, it can
increase the volume of ticket distribution at its corporate
website.
2) Blue Ocean Strategy of Etihad Airways
Blue Ocean Strategies competing head-to-head with other
suppliers for known customers in an existing industry. And Etihad
Airways is doing so with competing head to head with Emirates
Airlines. In recent years Etihad Airways is a pioneer in huge
investments in environmentally friendly technologies.

3) Open innovation of Etihad Airways

Etihad Airways prime focus is on providing better service for the
customer. And also strive to make travel safe and environment-
friendly by practicing the highest global standards in both these
areas.

4) Seven S- Model of Etihad Airways

1 Business Environment/Strategy: Etihad Airways has
higher competition from national oil companies who are able
to operate at lower profitable level and an increasingly
volatile market.
2 Shared Value: The spirit values of Etihad Airways shared by
everyone in the organization.
3 Structure: Etihad Airways employ over 10,000 staff
representing more than 126 nationalities and 8,512 of whom
are based at its headquarters in Abu Dhabi. They have
several departments those are Human Resource Department
Marketing, Software Engineering, Hardware Engineering,
Project, Finance and Monitoring department etc.
4 Staff: Etihad Airways hire talent employee when they recruit
they consider knowledge, skills and experience, they
 consider their employee as an asset. Etihad Airways offer
attractive salary, pension plans, informs estimated
retirement date provides health care services.
5 System/ Infrastructure: State of the art technology and
exploration infrastructure.
6 Skills: Recruitment is based on skills, technical knowhow,
perseverance and diversity.
7 Style: Etihad Airways always focus on quality service,
innovation as well as teamwork for better performance of
the company.
3. Company Profile
Vision
As the National Airline of the United Arab Emirates, they seek to
reflect the best of Arabian hospitality - cultured, considerate,
warm and generous - as well as enhance the prestige of Abu Dhabi
as a centre of hospitality between East and West. Their goal is to
be a truly 21st century, global airline, challenging and changing
the established conventions of airline hospitality.
Etihad Airways welcome everyone who flies with them as a
distinguished Guest, as reflected in the unique hospitality they
offer in their Guest Travel Classes. With fresh new approach to
service in the air and on the ground, Etihad Airways always seek
to return a sense of freedom to flight as well as a relaxing
experience; and also strive to make travel safe and environment-
friendly by practicing the highest global standards in both these
areas. And Etihad Airways always in touch with Customers needs.
Mission
As the national carrier of UAE Etihad mission is to make Arabian
hospitality closer and available to other part of the world by a
creating sense of cultured, considerate, warm and generous staff
attitude and service. As now remarked as innovative carrier
Etihad wanted to maintain its name as most innovative airlines in
the world as compares.

Company Organogram
Etihad is governed by a Board of Directors under the
chairmanship of HH Sheikh Hamed bin Zayed Al Nahyan and
operates in terms of its founding legislation and the Article of
Association of the Company. The current Board consists of seven
independent non-executive members and has two sub-
committees, being an Executive Committee and an Audit
Committee, each with its own charter and Chairman.

4. PESTEL, SWOT, Porters Five Forces

4.1 PESTEL Analysis of Etihad Airways
There are some factors in the macro environment that effect the decision making
process in an organization. To help analyze these factors marketers can
categorize it using PESTEL model. This distinguishes factors between political,
economic, social, technological, environmental and legal.
Political Economical

 Relatively Liberal Government as a flag carrier.

 Support of Sheikh to make this airline best in the world.
 Total Instability in Middle East makes difficulty to operate business in
region.
 Role of Abu Dhabi as capital
Social/Socio– Technological
Cultural
 Cosmopolitan  The existing order of aircraft is u
workforce and proceed so the airline quickly will incr
population so huge number of flight.
international customers  Development of devices online ser
access. department to give quick and b
 Plenty of wealth service to passengers.
people who can take
this type of airlines
service
 Still existing
discrimination of
women in the
workplace.
Ecological / Legal
Environmental
 Tough hot  Low tax regime as a flag carrie
environment in region United Arab Emirates
so it is very much  High cost of VISA to UAE so lim
challenging. labor force.
 Sound and others
restriction in urban
areas so it becomes so
challenging to operate
flight noise free.

The political situation in Emirates gives a competitive advantage to UAE

companies because of political stability in this region in comparison with other
Arabic countries. Etihad is based in Abu Dhabi which is a rapidly developing city.
Dubai has the advantage of starting its development earlier than other locations,
but on the other hand now the growth of Abu-Dhabi’s economy is higher. It even
more influences the Etihad’s role because its headquarters are located in a capital
of the country. There is a competitive advantage for Emirates and Etihad airlines
because they, as other companies in the country, benefit from a low tax regime
and lower costs in domestic airports. The currency value of UAE is closely
associated to the US Dollar, which resulted in a lower exchange value base cost
advantage over the EU rivals. The other features of macro environment are
shown at the PESTEL diagram.

4.2 SWOT Analysis of Etihad Airways

Strengths Weaknesses
1. Etihad Airways is a profitable1. Market share growth is
airline. A full year EBIT of US$ 137
restricted due to intense
million was recorded on revenues competition level.
up 36% to US$ 4.1 billion. 2. Flights having via destinations
2. Safest airways & Best in classhave their interval time often
airlines in between the competitor.
increased more than that was
committed.
Opportunities Threats
1. Five new routes were launched 1. Airways Services becoming
in Etihad Airways. Now total 81 more competitive.
destinations in 51 countries.
2. Online Payment & security 2. Fuel price increasing in recent
system is better than other years which is range $100 to $600
competitors.

4.3 Porters Five Forces

The company’s competitors can be best seen in their degree of challenge that they
pose to Etihad Airlines by virtue of a thorough competitors’ analysis using
Michael Porter’s five force analysis. This can be done as follows:

The Bargaining Power of Suppliers

With Boeing and Airbus being the only two su
dominance from these suppliers. This can on
marketing penetration spree and buys more fleet

The Threat of New Entrants

With UAE and its Asian counterparts advancing at a growth rate better than
 elsewhere, there is a huge likeliness that new commercial airline companies
would open in sometime. So, this would increase the various reasons for which
the customers would prefer switching.

Threat of Substitute Products

The competitors in this category

have been identified as Malaysian
Airlines and Emirates Airways. As
per the recent global recession, it has
become a mind-set for all the
companies to opt for flying at low
costs. In fact there are passengers
who are ready to go for flights that
offer no fringe benefits either.

Threat of Rivalry

The competitors in this category are Emirates Airlines, Saudi Arabia Airlines and
Qatar Airlines in terms of market share which is the biggest threat to the
company in terms of its market penetration strategy. As these airline companies
are increasing their number of fleets each day, competition is getting even tenser.

The Bargaining Power of Customers

This is comparatively low in the aviation industry. The customers generally have to pay the p
that is asked. Here, price reduction can be a good way for better market penetration. (Eti
Trumps its Competitors, 2010).
5. SWAN Analysis, TOWS Matrix
5.1 Swan Analysis
Strength:
 Etihad Airways is a profitable airline
 Safest airways & Best in class airlines
Weakness:
 Market share growth is restricted due to intense competition
level
 Flights having via destinations have their interval time often
increased more than that was committed
Achievement:
 Etihad Airways has been voted the World’s Leading Airline,
for the fifth consecutive year, at the World Travel Awards 2013,
held in Doha on November 30th.
 Etihad Airways won the award for World’s Leading Cabin
Crew and the prestigious World’s Leading Airline First Class
award for our Diamond First Class cabin.
 Airline of the Year 2013 by Global Traveler magazine in the
US.
 “The Oscars of the Travel Industry”, the World Travel Awards
are acknowledged across the globe as the ultimate travel accolade,
with winners setting the benchmark to which all others aspire.
Next Step:
 Etihad Airways has announce new routes will join a daily
service to Los Angeles and three flights per week to Dallas (United
States), plus daily services to Zurich (Switzerland), Perth
(Australia) and Medina (Saudi Arabia), all of which are scheduled
to commence in 2014.
 In 2015 the eight new routes will increase Etihad Airways’
worldwide network to 102 destinations.
 Etihad airways future deliveries will allow us to progressively
replace existing, less-efficient aircraft, add capacity in existing
markets, and launch flights to more destinations, with over 30
new international routes planned by 2020.”
5.2 TWOS MATRIX

Internal Environment
Strength Weakness
1. Etihad Airways is a 1. Market share growth is
profitable airline. A full year restricted due to intense
EBIT of US$ 137 million was competition level. CPM Score
recorded on revenues up 36% 2. Flights having via 2.85
to US$ 4.1 billion. destinations have their
2. Safest airways & Best in interval time often increased
class airlines in between the more than that was
competitor. committed.
External Environment
Opportunities Threats
1. Global Destination, now 1. Airways industry
total 81 destinations in 51 becoming more competitive.
EFE
countries. 2. Fuel price increasing in
2. Online Payment and recent years which is range Scores 2.5
security service is better than $100 to $600.
other competitor.

6.0 Value Chain Analysis of Etihad Airways

Etihad Airways is a service industry, so their value chain is
different from other type of organization. Here we focus on the
Etihad Airways Value Chain Process.

There is also some of Value chain process is involve in Etihad

Airways. There are:
Human Resource Management
Human resources or human capital is the intangible resources of
abilities, effort, and time that workers bring to invest in their
work. The people at Etihad Airways are the major contributors of
strategic capability to the company. Service has a big impact on
the customers’ perceptions about the company’s product. Because
of the importance of its people, Etihad Airways formulated an
employee development strategy through proper and effective
training. This strategy is expected to strengthen Etihad Airway’s
position in the marketplace. Employee development can be an
essential ingredient of an organization’s competitive advantage.
Employee development includes all of the education and training
that organizations might invest in their employees such as
training employees to perform effectively in their current jobs,
orienting employees to the workplace, developing them for
advanced positions or programs, and building organizational
capability for future success. Etihad Airways promotes a working
environment wherein the employees are free to act in both the
company’s and passengers’ best interests.
Technology Development
Etihad Airways become Asia’s leading e-business airline by
implementing ambiguous strategy and fully harnessing state-of-
the-art technology. The company is determined to provide their
customers and business partners with greater ease and
convenience, as well as to create new business opportunities for
business growth and to enhance efficiency and economic benefits.
The company has unveiled a series of e-business initiatives in the
areas of passengers, cargo, procurement and internal procedures.
Among the technologies that Etihad Airways introduced in order
to enhance passenger experience are:
1. Online Check-in
2. Airport Lounges
3. In-flight E-mail System

Other Service
More and more corporations throughout the world are adding
value to their core corporate offerings through services. Modern
corporations are increasingly offering fuller market packages of
consumer focused combinations of goods, services, support, self-
service, and knowledge. Etihad Airway’s goal is to deliver
superior service and value to its customers and to become the
world’s most admired airline. The organization recognizes that
the quality of service sets it apart from its competitors. The
organization is committed to meeting on-time performance goals,
maintaining and growing international route network, and
increasing flight frequencies to meet market demand. Etihad
Airways strives to deliver Service Straight from the Heart and
takes pride in making its customers feel safe, welcome,
comfortable and above all, reassured.

7. GREATER Model, SMARTER Model

7.1 GREATER- Model
Goals:
 They consider health, safety and environment (HSE)
excellence, as well as sustainable development (SD), throughout
their worldwide operations essential to their success and the
foundation of their SPIRIT values.
Roles:
 A high- quality portfolio of existing assets, promising major
projects under development worldwide, and investment in
numerous new emerging businesses, combined with employees
who make a difference, ensures an opportunity- rich future for
Etihad.
Expectations:
Returns
 Execute disciplined capital program of approximately $14.2
billion per annual.
 Continue optimization of the portfolio and shift to high-
margin production.
Growth
 Net Profit Jumped 48 percent (US $42 million) and revenue
also increase by 6.1 billion.
 EBIT has been increased by 22 percent to 208 million and
EBITDR rise up to 30 percent.

Distributions
 In 2012, Etihad carried 10.3 million passengers, a 23%
increase on the previous year.
 Repurchase shares, broadly tied to asset sales.

Accountable and Transparent:

 Etihad believes it is their responsibility to seek to understand
and be understood by their stakeholders – a diverse group of
individuals and organizations who can impact or be impacted by
their business.
Timing:
 This model represents the Short term proposal for Etihad
Airways. It’s a one year and short proposal for Etihad. This
proposal could be used in 2014 to 2015. Etihad is one of the
successful industries. They always maintain good time
management system. By taking personal responsibility and pride
in their work to deliver timely, quality results that benefit Etihad
and help achieve their vision and strategy.

7.2 SMARTER Model

Specific:
 To keep the Sustainable Development Report current, key
performance metrics are updated every year. All reported HSE
data are based on operated assets only. Environmental data are
represented as 100 percent ownership interest regardless of actual
share owned by Etihad Airways.
Measurable:
 There worldwide annual average ticket sales price from
continuing operations remained relatively flat in 2012, from US
$137 million on revenue up to 36 percent to US $4.1 billion .
Achievable:
 They will continue to expand reporting assurance to cover a
broader scope of sustainable development metrics. They will
develop company guidance for implementing stakeholder
engagement principles

Realistic:
 Etihad Airways stake in Air Seychelles gives 'realistic way
forward' to the island carrier's future.
 Airway’s 40% stake in Air Seychelles gives a much-needed
second lease of life to Air Seychelles, who says the stake offers a
"realistic way forward" for growth, critical as the carrier has scaled
back almost its entire network.
Time:
 This model represents the long term proposal for Etihad
Airways. It’s a four years and long term proposal for Etihad. This
proposal could be used in 2014 to 2018. They have talent
workforce those are responsible to do the work effectively and
efficiently in timely. Good time management is their one of the
key success factor.
Encompassing:
 Etihad Airways is evaluating and developing technologies for
renewable energy, and is leveraging expertise, intellectual
property and physical assets in pursuit of economically feasible,
renewable energy business opportunities.
 Working Together encompasses investment in the training,
development and wellbeing of a multicultural workforce, with the
core airline employing stay from more than 140 nationalities
during 2013.
Reviewed:
 A career with Etihad Airways is a rewarding one. They value
their people and ensure that the rewards and benefits are
comprehensive, competitive in the markets where they operate
and designed to recognize each individual’s contribution.

8. BCG Matrix of Etihad Airways

Relative Market Share
HIGH LOW
Market
Growth HIGH
Rate

LOW

Analysis:
Etihad Airways is the fourth largest airline in the Middle East and
it is the second largest airline in the United Arab Emirates, after
the Dubai-based airline Emirates. Etihad Airways has growing
market but low market share because buyers have yet to discover
them. According to World Airline Awards (WAA) Etihad Airways
is one of the fastest growing airline companies in the world.
Etihad Airways needs to increase market share rapidly otherwise
it becomes dogs. Singapore Airlines, Emirates airlines, Qatar
Airlines are in the stars because they have high growth rate and
high market share.

9. PURE Objective & ViSA Model

9.1 PURE Objectives
Positive:
 Most of the Customer preferred Etihad airline. Because this
airline’s service is excellent, its feel as if you are travelling
business class, nothing is too much trouble for the staff.
Entertainment is the best with excellent earphones. That’s why is
airlines are awarded by fifth consecutive years.
Understood:
 Because of good understanding with customer Etihad Airways
stake in Virgin Australia rises to 21.24 per cent. Loyalty programs
give companies the ability to understand who their consumers are
and allow them to acquire new consumers. Companies use the
power of loyalty programs to get consumers to spend away from
the competition.
Recorded:
 Etihad Airways has recorded first-half revenues of $3.2 billion,
up 28% compared to the year-ago.
 Passenger revenue growth was even stronger, up 13% year-on-
year to USD1.8 billion.
Ethical:
 Etihad Airways expects all suppliers to comply with its supplier
ethics and code of conduct, regardless of local business practices
and social customs.
 Ensuring that all their employees who interact with Etihad
Airways understand and adhere to the Etihad Airways Supplier
Ethics and code of conduct for doing business with business with
Etihad Airways.

9.2 VISA Model

Vision:
To deliver an effective transport system that contributes to the
economic growth, quality of life and environmental sustainability
of the Emirate of Abu Dhabi.
Strategy:
Etihad’s strategy is to be best airline in the world, to become
profitable and to contribute at its best to Abu Dhabi 2030 Plan.
Action Plan:
Wherever possible, investigation reports should also make
recommendations to management on corrective action to be taken
in order to reduce the likelihood that the particular incident will
reoccurs.

10. Market Analysis including Market

Segmentation
Market Analysis
The marketing process starts by segmenting the market, selecting
or targeting the most profitable segments, and
then positioning the service or product on the minds
of consumers within the selected segment. Then providing and
communicating the service or product. In order to succeed in
today’s competitive markets, a strong marketing strategy should
be put in place using the right principles, and this is just what
Etihad did. CCO Peter Baumgartner described the marketing
strategy at Etihad, after receiving the 2008 marketing award i.e.
the “Airline Strategy Award”, that their marketing strategy is
driven by four principles. First, “undifferentiated superiority”
second, “to be inspirational to the individual” (they aim to act
like a small airline, through personalized service in all classes,
even the economy class), third to “behave like a luxury brand but
don’t lose sight of the entire spectrum”. Baumgartner says: “We
are a luxury brand and position ourselves as a luxury brand, but
everybody has aright to fly Etihad and experience a touch of
Etihad luxury”, fourth is about promoting Abu Dhabi and lining
up Abu Dhabi’s new image with Etihad’s, through the new slogan
“From Abu Dhabi to the world” (Airline Strategy Awards 2008).
The integrated marketing mix for services can be summarized
using the 7 P’s model, which consists of Product, Price, Place,
Promotion, People, Process, and Physical Evidence, below is how
Etihad considered each part, with regard to the Segmentation,
Targeting, Positioning (STP) process.

Product Strategy
As far as the first class and business class is concerned, Etihad
Airways segregates its services as Etihad Diamond First Class and
Etihad Pearl Business Class. This is integrated with actual staff
provision and the multi-cuisine availability on board. The
company’s augmented products give it maximum competitive
advantage. This has been diagrammatically represented in the
subsequent diagram. Abu Dhabi being the centre of tourism for
many, gives the company a location advantage. The company has
chauffeur service for its customers not only at Abu Dhabi airport
but other airports as well where the company’s airline operates.
This is especially for the 1st class and business class passengers.
Also, the company provides 24 hrs departure facilities and only an
hour early arrival as against the normal 3 hour early arrival in
other company’s flights. The potential product of Etihad Airways
does not include lounge which can be developed over time so as to
draw more customers in the targeted segment. The company also
does not have the baggage at the door pick up facility. Once this is
provided, it would be more convenient for the passengers to avail
the facility. Also, hot-towel can be provided to passengers at
departure to suit the likings of 1st class and business class
passengers.

Price Strategy
The company has a market penetration pricing strategy so as to
increase the market share in United Arab Emirates. If the
company can deliver the same services at the same price as
compared to Emirates Airlines and British Airways, it has chances
of achieving its break-even as it targets. Once, this has been done,
the company can raise prices by about 5% and fall in the same
category of customer perception as Emirates Airlines. This way
the customers would also not consider the company as a low cost
carrier which could damage the image of being a first class or
business class carrier.

Place Strategy
Etihad Airways would not only avail booking facility at its main
offices but also increase sales in general throughout the Asian
region that it targets. Also, it can increase the volume of ticket
distribution at its corporate website. This would enable the busy
passengers of 1st class and business class to customize their air
travel. The drawback in this regard is that the company does not
have many sales agents. The company should look forward to
appoint more sales agents and eventually increase its sales.

Promotion Strategy:
The customers’ perceptions with respect to the promotional
strategies of the company are as follows:
 Sales Promotion: The Company’s customers prefer the
option and bundled pricing efforts and the consistent updated
facilities with respect to offers in this respect. This would help a
long way in increasing market penetration.
 Direct Marketing: By taking part in a number of travel and
tourism events, the company’s staff spread direct word-to-mouth
marketing which has been a matter of great appreciation.
 Sponsorship: The Company has been amongst the pioneers
in sponsorship by sponsoring Manchester City F.C, Melbourne
City Football Club, England Cricket Team, and Mumbai Indians
Cricket Team. The Company has also sponsorships by sponsoring
in huge amounts at events like Abu Dhabi Grand Prix and also the
Ferrari F1 team. The motorsports fans of the company were highly
delighted at this step. Also the company’s involvements at events
like Abu Dhabi Golf Championship, Gaelic Athletic Association
(GAA) have been appreciated largely by 1st class and business
class customers. And the company’s involvement at Al Ain
Football Clubs (UAE) Airline partner, Etihad Stadium- Melbourne
Australia, Sydney Opera House, Australia.
 Advertising: Etihad Airways advertises on all media channels
form radio to television to newspaper to magazines and travel
magazines. Presently Etihad Airways does 20% print ads, out of
which 10% are in leading newspaper as Gulf News and Khaleej
Times and 10% are in travel magazines.

People Strategy
The company’s staffs have been highly acknowledged throughout
its flight services. The only problem has been in a certain case
when a passenger was treated inferior to a staff when he required
a better seat to facilitate his long-broken leg. Such issues need to
be worked upon otherwise with the type of education and
courtesy; the company has high prospects especially in the 1st
class and business class sectors. The company has scored 91.5% in
a survey conducted Ethos Consultancy on customer service
benchmarking. If the company wishes to make the most out of the
survey, it should further provide better training and development
to its staff. Also, it must be kept in mind that no matter how many
flights the company increases, a customer would always go for
better hospitality which becomes all the more important in the 1st
class and business class services. The employees can work as
catalysts to word-to-mouth marketing.

Physical Evidence:
In air transportation physical evidence is everything that’s visible
to customers, it starts from the logo, uniforms, and facilities to
make bookings, and lounges, to the seats, services, and space at
the aircraft. Etihad provided well designed offices, superior cabin
design in all classes, used a well known fashion designer to design
the staff uniforms. All these activities helped in improving the
customers’ perception of the services provided.

Process:
This refers to the systems used to deliver the process. It can be
described as the whole process that starts with customers making
the booking, until they depart or arrive. Etihad built strong
systems that can provide the customers with the required services
they are paying for, these systems include on-stage systems such
as the online information system through the website, and offices,
back-stage systems such as the booking and scheduling systems,
and all the support systems that helps Etihad to perform in the
required way, such as internal IT systems across all the
departments, and ‘Amadeus’ Availability Management, which
gives Etihad ways to choose what inventory to release to which
sales outlet, to make sure all seats are sold at the right time at the
right price, through the most productive channels, agents, and
markets (Amadeus website 2007)
Market Segmentation
Within markets, not all customers are the same - they have
different tastes and want different things. As a result, particular
markets can usually be further divided into discrete segments.
Each group consists of people with similar needs and
requirements. The organization then develops strategies that are
closely aimed at satisfying each customer group. This process is
known as market segmentation. Through segmentation, Etihad
Airways can identify market opportunities and meet its marketing
objectives. Segmentation gives an airline a better understanding
of its customers, the services they require, where and when they
want those services and how they would prefer to pay for them.
Etihad Airways has used traditional approach adopted by legacy
carriers for segmentation. Etihad Airways focuses on business
travelers and the price sensitive leisure travelers. The business
paradigm of Etihad Airways has clearly differentiated these two
segments by catering to their heterogonous need. In order to
penetrate their existing market and expand their revenue base
they are also focusing on additional segment based on consumer
loyalty. Etihad Airways uses a form of psychographic
segmentation to divide up the market for its services. This
involves identifying the social class, lifestyles, opinions, interests,
behavior and attitudes of customers. Etihad Airways segments its
market so that it can:
 Identify consumer needs and the proportion of customers who
have those needs.
 Develop products and prices to meet these needs.
 Target communications at customers within each segment.
 Allocate funds to support and develop each market opportunity.

Detailed analysis of segmentation strategy used by Etihad Airways

is given as below:
 Preferences: The two major groups of business and leisure
travelers differ in their preferences. It’s believed that on an
average in aviation industry elite travelers contribute up to 50% of
revenue though they add up to less than 20% in passenger
number (Brancatelli, 2010). Hence the preference of this
particular segment (Business travelers) is given additional
importance. They are given exclusive in-flight service with respect
to variety of cuisines being served, exotic drinks and special
seating comfort (Wirtz and Johnston, 2009). At the same time
since the other segment i.e. the leisure travelers form the major
chunk of passengers their preferences also cannot be ignored.
They too are given in-flight services which can be termed best as
per industry practices.
 Nature of demand: Since the nature of demand varies with
respect to business and leisure travelers it is used as a parameter
for discriminator analysis. Business travelers demand more
working space, internet and telephone connections whereas
leisure travelers demand more in-flight entertainment features.

Market segmentation therefore enables Etihad Airways to

maximize the efficiency of its marketing efforts by moving the
company to use a different strategy for each market segment.

11. EFE Matrix of Etihad Airways

Key External Factors Weight Rating Weighted Score

Opportunities

3. Global Destination, now 0.10 1 0.10

total 81 destinations in 51
countries.
4. Online Payment and 0.20 3 0.60
security service is better than
other competitor.
5. Five new routes were 0.15 2 0.30
launched
6. Increasing popularity of 0.05 4 0.20
Etihad
Threats

3. Airways industry 0.20 3 0.60

becoming more competitive.
4. Fuel price increasing in 0.15 2 0.30
recent years which is range
$100 to $600.
5. Natural environment 0.10 4 0.40
condition could also be a
threat to any airline
6. Entry of new rivals in 0.05 1 0.05
such a wealthy part of the
world is relatively easy.

4= the response is superior Rating

3= the response is above
average
2= the response is average
1= the response is poor
Total 1.00 2.55

12. CPM Analysis of Global Airlines Services

Emirates Etihad Malaysian Airlines

Airlines Airways

Critical Weight Rati Score Rati Score Rati Score

Success ng ng ng
Factors

Advertising 0.20 3 0.60 4 0.80 4 0.80

Quality of 0.10 3 0.30 3 0.30 3 0.30
Service

Price 0.10 4 0.40 3 0.30 3 0.30

Competitivene
ss

Management 0.10 3 0.30 3 0.30 3 0.30

Financial 0.15 3 0.45 4 0.60 3 0.45

Position

Global 0.20 4 0.80 2 0.40 3 0.60

Expansion

Customer 0.10 4 0.40 3 0.30 2 0.20

Loyalty

Market Share 0.05 3 0.15 2 0.10 2 0.10

Total 1.00 3.40 3.1 3.05

0

4= Major Strength, 3= Minor Strength, 2= Minor Weakness, 1= Major

weakness

13. QSPM (Quantitative Strategic Planning

Matrix) for
Etihad Airways:
 The QSPM is a Strategic decision - making tool that allows
strategies to evaluate alternative strategies objectively, based on
previously identified external and internal critical success factors.
Like other strategy formulation analytical tools, the QSPM
requires good intuitive judgment.
Alternative -1 Altern
Expand into more cities such as Add 15 A
European market and Asian
market
Key Factors Weight AS TAS Weight
Strengths
Etihad Airways is fastest growing airline in 0.09 3 0.27 0.06
Middle east
Etihad Airways is one of the most profitable 0.10 2 0.20 0.12
airlines in the world in recent years.
Etihad has a reputation for great customer 0.11 3 0.33 0.10
service
Etihad Airways is renowned for pioneering new 0.12 1 0.12 0.13
ideas and leading markets trends often in
contrast to the conventional industry view.
Etihad Airways has strong existing distribution 0.15 4 0.60 0.17
channel and networks

Weaknesses
Depend on a single producer 0.10 3 0.30 0.12
There are inconsistencies service quality in some 0.15 4 0.60 0.12
Etihad Airways flight segment
Most employees are form nearby low-wage 0.08 3 0.24 0.06
nations and there may be demand for high wages
in the near future.
Though wholly owned by the government of 0.10 2 0.20 0.12
Dubai , Etihad Airways receives no financial
support from the government
Sum Weights 100% 100%
Opportunities
The heavily populated China and India are at 0.08 4 0.32 0.06
closer reach for Etihad Airway’s scope of
operations to these high –traffic-
volume countries
In general Asian continent is witnessing an 0.10 4 0.40 0.08
economic boom and the airline has really
benefited from this opportunity
With an increase of nearly 4 million people in the 0.18 3 0.54 0.20
European and Asian there is an expansion of
develop cities
Increased amount of upper level business 0.10 2 0.20 0.11
traveler has led to greater demand for better
seats
Etihad Airways is most important customer of 0.16 2 0.32 0.15
Boeing and airbus aircraft makers

Threats
New tax systems and higher ticket taxes 0.09 3 0.27 0.08
The airlines industry pays high salaries and 0.08 2 0.16 0.11
pensions to pilots which is not sustainable for
Etihad Airlines
The growth strategies of regional 0.10 4 0.40 0.06
competitors such as Emirates and Qatar Airways
are challenging to Etihad Airways
Etihad may become a potential pawn in Dubai’s 0.11 0 0.00 0.15
scramble for financial stability
Sum Weights 100% 100%
Sum Total Attractiveness Score 5.47 >

Note: AS= Attractiveness Score, TAS= Total Attractiveness Score

Attractiveness Score:
 1= Not acceptable
 2= Possibly acceptable
 3= Probably acceptable
 4= Most acceptable
 0= Not relevant

14. Financial Analysis

Etihad Airways financial performance (Based on Last three years
auditor’s report):
Year Revenue Net Profit EBIT EBITAIR
2013 6.1 62 208 979
 Billion (US $) Million (US $) Million (US $) Million (US $)
2012 4.8 42 170 753
Billion (US $) Million (US $) Million (US $) Million (US $)
2011 4.1 14 137 648
Billion (US $) Million (US $) Million (US $) Million (US $)

Increasing the profitability year by year (Based on year 2011 profitability)

Year Revenue Net Profit EBIT EBITAIR
2013 Increased 27 Increased 48% Increased 22% Increased 30%
%
2012 Increased 17 Increased 200 Increased 24% Increased 16%
% %

In the financial performance of Etihad Airways we see that, the

record financial result for 2013, with net profit up 48 percent to
US $62 million on revenue up 27 percent to $6.1 billion. The
record performance also saw earnings before interest and tax
(EBIT) up 22 per cent to US$208 million and earnings before
interest, tax, depreciation, amortization and rentals (EBITDAR)
up 30 per cent to US$979 million, a margin of 16 per cent of total
revenues. This marked the third successive year of net
profitability, in the airline’s tenth year of operation. This outcome
is remarkable, given Etihad’s youth and ambitious growth
program, as well as its continued investment in product and
service innovation. These positive results reflect the focus on its
business plan and Board mandate, and the implementation of its
strategy to expand through a combination of organic growth, code
shares and equity investments in key markets. This growth
strategy is underpinned by a rigorous cost control program and
strict financial discipline.

15. Competitors analysis

Although competing with these established market leaders is
going to be very difficult, Etihad Airways should be confident to
gain the market share and achieve good profit. Competitor
Analysis is an important part of the strategic setting up method.

This analysis provides both an offensive and protective strategic

framework to identify opportunities and threats.
As we have seen in the previous analysis, the direct competitors of
Etihad Airways are Emirates Airlines, Saudi Arabia Airlines, Thai
Airways, Qatar airways, Malaysian Airlines and Singapore Airlines
in different regions. As far as its other Asian competitors are
concerned, Singapore Airlines also poses a big threat. The biggest
of all is Emirates Airlines. Also, the company has a number of
indirect competitors. They can be in Telecom Industry and also
Holiday Cruise Line Industry. Telecom industry has made
communication so easy that video calling is so easy and cheap that
people would not need to go to places for meetings. Some Holiday
cruise Line industry players like Carnival Cruise Liners and Star
Cruises have taken up the job of not only transportation but
providing hotel facilities and other amusement facilities, beyond
Etihad Airlines’ reckoning. As far as direct competitors are
concerned, with Emirates, customers receive larger value for it
being more than 25 years old in the industry, for Saudi Arabia
Airlines, this is because of its cost leadership strategy while the
other competitors offer same value as Etihad Airways. This needs
some change of strategy by the company.

16. Break even Analysis

The break-even level or break-even point (BEP) represents the
sales amount—in either unit or revenue terms—that is required to
cover total costs (both fixed and variable). Profit at break-even is
zero. Break-even is only possible if a firm’s prices are higher than
its variable costs per unit. If so, then each unit of the product sold
will generate some “contribution” toward covering fixed
costs. In economics and business specifically cost account,
the break even point (BEP) is the point at which cost or
expenses and revenue are equal: there is no net loss or gain, and
one has "broken even." A profit or a loss has not been made,
although opportunity cost been "paid," and capital has received
the risk-adjusted, expected return. In short, all costs that need to
be paid are paid by the firm but the profit is equal to zero. Etihad
Airways looks certain to make 2013 a milestone year, carrying the
positive momentum of 2010 to 2012 into the New Year. The
company reported revenue over last year grew year-on-year and
continued growth in 2013, and in year 2010 it was expected to see
it post a break-even result that year. Profits are forecast for 2014, a
goal Etihad Airways has had its eye on for some time. Cost figures
were not released by the airline, but Etihad stated that it has
beaten its own cost reduction targets for the year.
We also know, breakeven point =)
= 72520/ (59210-57250)
= 37X
17. KSF Analysis
The airways business is an extremely competitive marketplace.
And every company has to some key success factors (KSF). Key
Success Factors are those functions, activities or business
practices, defined by the market and as viewed by the customers
that are critical to the vendor/customer relationship. Key
Success Factors are defined by the market and by the customer,
not by the company. They revolve around skills, processes and
systems.

And here we know about Etihad’s Key Success Factor. There are
relating on:
1. People
2. Products & Services
3. Route System
4. Partnership and Alliance
5. Revenue and Cost control

1. People: People are the most important factors for Etihad

Airways. People and performance division always support and be
supported by their various business division. Etihad has unique
way to recruiting and training process led to provide in flight
customer service. And this all is possible because they have:
 Awarded Winning cabin crew.
 In flight Chef
 Training for communicative skills and crisis management
 Introduction of “iachieve” a performance based pay

2. Products & Services: this is another important key success

factor for Etihad. And Etihad dealing in a service industry
identifying its key success factors in the field of product and
services are very important factor for attaining a better
competitive advantage. Etihad’s KSF in product service have been
identified as:
 Inflight Developments
 Aircraft Developments
 Ground Product Offering

3. Route System: Etihad’s new and frequencies in the route

flight schedule system made them to achieve a better advantage in
the competitive markets for fast east region. Etihad’s daily flights
to the several destinations like Beijing, Seoul and Bangkok made
their route system unique in Far East markets. But now they have
continued their flights in several destinations.
By the end of September 2013, Etihad serves 96 passenger and
cargo destinations across Africa, Europe, North America, South
America, Asia and Australasia from its hub at Abu Dhabi
International Airport. Etihad Airways, along with Air
France, British Airways, Delta Air Lines, Emirates, Korean
Air, Qantas, Qatar Airways, Singapore Airlines, South African
Airways and United Airlines, is one of the few carriers to have
services to all six inhabited continents

4. Partnership and Alliance: At 1st March 2014, Etihad had

almost most of the codeshare agreements with many international
carriers. It had 43 codeshare agreements in place with leading
airlines and gave them advantage in serving several international
destinations. By Etihad’s remarkable alliance with Australia’s
Virgin Blue Group of Airlines in September 2010, made it Far East
customers having easy travel to Australia with no stop over.

5. Revenue and Cost control: Etihad made a significant

improvement in revenue and cost control with a robust support of
Finance division by providing support to the business with
financial, risk management, financing and other services.

18. Strategy Evaluation and Contingency Plan

Strategy Evaluation:
Etihad’s cooperate strategy is to be the best airlines in the world,
to become profitable and to contribute at its best to Abu Dhabi
2030 plan. Most of the Etihad’s cooperate strategy is created and
planned by the mandate from its shareholders. On the year of
2010 Etihad’s top management were focused on a strategy to grow
and achieve its scale quickly and to develop sustainable business
process. The company found that Etihad have successfully and
efficiently delivered its shareholders vision, but there are several
structural limitations, which complicated the airlines ability to
reach profitability. To overcome the limitations company
suggested a better business model in order to diversify its current
structure to engage in many partnerships, distribution, hub
operation and its air cargo. By approval of this business model by
Etihad’s senior management, Etihad have doubled its global
activity and profit level as compared to its other competitors.
Contingency Plan:
To ensure minimal customer inconvenience during lengthy delays
on the ground, Etihad Airways’ plan for providing customer
comfort during irregular operations is outlined below. Lengthy
tarmac delays can result from unusually severe weather
conditions, government-imposed operating restrictions, air traffic
control issues, or other issues associated with the airport facilities.
Even though these causes of lengthy tarmac delays are outside of
Etihad Airways’ control, they coordinate with all appropriate
agencies to ensure that the following policies will be implemented.
 Etihad Airways will provide at least a snack and potable water,
from the on-board catering supplies, no later than two hours after
the aircraft leaves the gate (in the case of a departure) or touches
down (in the case of an arrival) if the aircraft remains on the
tarmac. If the pilot-in-command determines that safety or
security considerations preclude this service, then this may not be
provided.
 Operable lavatory facilities will be available while the aircraft
remains on the tarmac.
 Adequate medical attention, if needed, will be available while
the aircraft remains on the tarmac.
 The flight crew will ensure that information on the status of the
delay is available to the passengers on the delayed flight at least
every thirty minutes while the aircraft is delayed, including the
reasons for the tarmac delay, if known.
 Etihad Airways will notify the passengers on the delayed flight
beginning 30 minutes after scheduled departure time (including
any revised departure time that passengers were notified about
before boarding) and every 30 minutes thereafter that they have
the opportunity to disembark from an aircraft that is at the gate or
another disembarkation area with the door open if the
opportunity to disembark actually exists.
 Etihad Airways will make every effort to provide sufficient
resources to deliver this plan.

19. Recommendation
1. Etihad needs to re-access its profitability in within particular
geographic area. It is necessary to go into code-share alliances in
certain markets where there is a decline in profitability. By going
into strategic alliances, Etihad will cut down significant cost and
obviously still gain marketing benefits of large size of network
spread and reduce competition on duopolistic routes.
2. Market penetration is recommended through cutting prices in
existing markets. Etihad should redirect its strategy to price
competition to widen market coverage from lower cost market.
This is probable because customers are more prices sensitive and
growth of budget airlines is increasing.
3. Etihad airways need more strategic plan for reducing their cost
and expenses because to survive in any financial crisis they need
more retained earnings to protect them.
4. They should have more of the customer’s service and loyalty
programs. The company should provide discount to their
corporate clients. The company should get in touch with their
clients when they have some promotional offers.
5. From competitive advantages and economic of scale, Etihad
can also strengthen or expand the function of other special
aircraft or specific cargo service to existing markets to gain
profitability.
6. Improving on people process is highly recommended. Also
technological strategy is an important pursuit.

20. Conclusion
Etihad has proved time and again that with it’s out of the box
attitude, backed by lavish Arabian hospitality it has earned a place
for itself in the minds of customers. Customers who have
experienced this service would vouch for the standards set by the
airlines. The constant up gradation employed by Etihad in
providing service by acquiring new aircrafts, ensure that their
planes will be in the air for the majority of the time than on
ground for maintenance. Etihad currently employs the strategy of
having fewer destinations than its competitors. This has enabled
the airline to provide better service for the ones that they have
than run off in search of newer destinations. This concept of
quality over quantity is of great concern in the airline industry,
particularly if the airline wants to be perceived as a luxury brand
and not a cheap low cost, no frills airline. Potential customers can
be gained only if they could be convinced that they are getting
more bangs for their buck. The perception of customers towards
quality has drastically risen over the years and many wouldn’t
mind paying the extra money if they are convinced they are
getting what they paid for. Etihad knows this and strategically
places their products and services to attract these customers. They
know that the airline industry is a delicate one and word of mouth
advertising is very crucial for their survival. This is the reason they
truly focus on their customers and make sure that they feel
satisfied and make it a point to come back after being on one of
their flights. As Abu-Dhabi is turning into an international tourist
destination and business centre for the Middle East, Etihad being
operated from here will be strategically positioned and they stand
15 to gain a potential share of the action. Hence upholding the
concept of ‘Abu Dhabi to the world’ is very crucial for their
marketing strategy. This plus point of Etihad to convince their
customers of their superior service is what drives them forward.
To conclude it can be safely said that if Etihad continues to
provide this sort of superior service and follows the low price
penetration strategy it can enter more markets and repeat its
success. The airline has proved that it is able to retain its
customers and that their customers recommend the carrier to
others have worked in the advantage of Etihad. The carrier has
to build on this brand loyalty and continue to provide better
and newer services and gradually add more destinations and grow
at the steady pace. This will see the airline reaching a top position
and turning out to be one of the most preferred ones in the
aviation industry.

21. References
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and Case, 12th edition. Pearson Prentice Hall.
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Marketing, people, technology, strategy. 6th edition. USA: Pearson
Prentice.
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2012”. Retrived from the Wikipedia online website:
http://en.wikipedia.org/wiki/Etihad_Airways.
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http://en.wikipedia.org/wiki/Etihad_Airways.
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Arab News online.
website: http://www.arabnews.com/news/534286.
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website:http://www.thenational.ae/business/industry-
insights/aviation/etihad-airways-lands-first-profit.
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class awards. The daily online newspaper ‘‘Dubai Chronicle” Jun
19, 2013. Retrived from the The Dubai Chronicle online
newspaper.
website:http://www.dubaichronicle.com/2013/06/19/ethiad-
airways-again-tops-skytrax-first-class-awards/.
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http://www.scribd.com/doc/42673475/Etihad-Airways-
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